Nine million people – 18% of the adult UK population – borrowed money to pay for essentials in July, according to research from Debt Advisory Centre.
The research shows that Britons used credit to pay for food, for utility bills and even to make repayments on other debts during what can be one of the most expensive periods of the year for families – the summer school holiday.
Worryingly, 3% of those questioned, equivalent to 1.5 million adults in the UK population, paid their mortgage or rent by borrowing – for example, taking out a loan or using a credit card cash advance. A further 5% used borrowed money to pay a gas, electricity or water bill, 4% borrowed to make payments on existing debts, while 6% used credit to pay for food.
The ﬁndings do raise the question of how well some people will manage their once-a-month Universal Credit payment – and the impact this could have on them meeting their essential outgoings.
Young adults between the ages of 25 and 34 seem to be struggling more than other age groups. In this group, 7% borrowed to pay their mortgage or rent, 8% used a loan or credit card to pay their utility bills, and 11% went into debt to buy food.
This group was also the most likely to borrow to pay off other debt, with 7% doing so to keep up with repayments on earlier borrowing.
The survey shows that despite signs of recovery in the economy, many people are still left struggling to get by from month to month.
Although many people will need to borrow money from time to time, borrowing to cover essential costs can be a sign of serious ﬁnancial problems which could get even worse once interest rates begin to rise.
Borrowing money to cover the monthly mortgage payment or rent is particularly serious, as it is arguably the biggest priority for most people.
For those that get help with their rent, Universal Credit replaces housing beneﬁt. This means that money for rent will go straight to the beneﬁts claimant rather than the landlord. If this is spent on other things, it could lead to the claimant losing his or her home.
People who are unable to pay their mortgage or rent would be well advised to get in touch with their mortgage provider or landlord to explain the situation. If that doesn’t help, it may be time to seek expert advice.
Regionally, a greater proportion of people living in London are borrowing to pay for essentials than elsewhere in the country, with 7% taking out credit to meet mortgage and rent payments, 8% to pay gas, electricity and water bills, and 6% borrowing to meet repayments on other debts.
But although fewer people borrowed to meet mortgage, rent and debt payments in the East Midlands, 10% borrowed to pay their utility bills – the highest percentage in the UK.